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 KAZAKHSTAN International Business Magazine №2, 2006
 Aktyubinsk Oblast: Banking on Innovation
Aktyubinsk Oblast: Banking on Innovation
Aktyubinsk Oblast boasts huge natural resources and considerable intellectual potential. It has a sound basis for establishing new production processes and industrial clusters in the region, in line with the Strategy for Industrial and Innovation Development of Kazakhstan. Last year alone, 59 new investment projects worth a total of $400m were implemented there. Though the oblast is considered to be oil-driven, new blueprints for development of manufacturing are being developed here, and science-intensive, deep-processing technologies are being introduced. Yeleusin Sagindikov, Head of Aktyubinsk Oblast administration, answers our questions.
Mr. Sagindikov, which sectors shape the basis of the oblast's industrial potential?
If we look at the oblast's socioeconomics, we'll see that there has been a steady growth tendency according to almost all indicators. The industrial potential stems from the unique industrial complexes built in the 1940-60s. Today these enterprises still supply competitive products to the international market.   
One of them is Donskoy GOK, the mining and concentration combine which accounts for the entire amount of chromites produced in Kazakhstan. In 2005 the combine produced 3.579m tonnes. The enterprise's raw material base is more than 300m tonnes of proven and around 800m tonnes of probable ore reserves. In addition to producing lump ore, the combine processes lower-class ore reserves. For this purpose, innovative production facilities have been launched.
The first of the country's ferrous producers, the Aktobe Ferrous Alloys Plant, a part of Kazchrome, occupies the leading position in the country's processing industry. The plant accounts for more than one fourth of ferrous alloys produced in Kazakhstan, which is 382,800 tonnes.
The chemical industry is represented in the region by the Aktobe Plant of Chemical Compounds producing chromium salts, chromic oxides, chromic anhydride and sodium bichromate.
Oil production is crucial for the oblast's economic growth dynamics. The share of crude and associated gas production grew from 67% to 72% in a year. In 2005, 8m tonnes of oil and 2,139.5m cu m of natural gas were produced in the oblast.
CNPC-Aktobemunaigaz is a major oil and gas company. It develops the Zhanazhol and Kenkiyak deposits and heavily invests in production facilities and the social infrastructure of the oblast. One of the crucial points of the company's complex gas utilization programme is laying the 155-km gas pipeline Zhanazhol-KS-13. After the pipeline (with a flow rate of 5,200m cu m of gas per year) is commissioned, we will access the Bukhara-Ural main gas pipeline, which will greatly increase the economic profits from selling Aktobe gas. At the same time, the third gas treatment plant is being built at the Zhanazhol field with a design capacity of 6 billion cu m of gas and 1.5m tonnes of condensate per year. So far, pre-design and project co-ordination work has been completed, and bids for purchase of large equipment (it requires a long delivery and construction term) have closed. 
Supplying various construction materials throughout the country, construction enterprises also play a serious part in the oblast's potential. Manufacturing of engineering production, woodwork, food, textiles and sewing industries is expanding. The agro-industrial complex is being revived and adjusted to market conditions.
What should be done first to boost the oblast's competitive edge?
We stick to the policy of economic diversification. We must withdraw from merely selling our raw materials and engage in processing and selling high value-added products. That's what the Industrial and Innovation Programme is targeting. By last year's results, the oblast saw an almost 20% increase in the processing sector's production thanks to commissioning rhodium and zirconium producing floors and two non-metallic ore plants. The launch of the first stage of the Koktau GOK Mining and Concentrating Combine for Processing Copper and Zinc will also be extremely important for the oblast. Rolled metal, copper wire and extra pure copper – this is an incomplete list of the expected combine's production. The facility is being built in the steppe 60 km from Khromtau.
The construction of the new GOK will comprise three phases and cost over $400m. The production cost in the first phase will be 20 billion tenge. After the third phase is launched, the figure will come to 80-100 billion tenge.
This year, the construction of a glassworks will begin. It will process raw materials extracted from the oblast's deposits of quartz sand and other required components. It is planned that the enterprise will produce 20m sq m of sheet glass worth around 120 billion tenge per year. This, too, will be high value-added production.
You can make an easy calculation. Today the oblast's agriculture employs 45% of the population and produces 25 billion tenge worth of goods, whereas an enterprise like Koktau GOK will produce at least 80 billion tenge worth of production. We plan to establish ten to twelve such high-tech companies in the next five or six years. Each will create 2,500-3,000 jobs and pay high salaries to its employees.
The oblast's social sphere – including health care and education – will also benefit from these developments. We are only worried about the lack of high-class professionals in the oblast. Presently, we are suffering from a deficit of human resources, as local universities do not meet the labour market's requirements. This is a huge problem to be solved. The youth have to strive for knowledge, not standing in line at job centres seeking one-off jobs. Personally, I already worked in the countryside when I was ten years old. I've always been into sports and won Kazakhstan's boxing championships several times. We need to cultivate a love of knowledge, productive work and self-perfection among the Kazakh youth.
Who is currently willing to invest in the Aktobe oblast?
Local businesspeople don't yet have the large amounts of capital that are needed for substantial investment projects. Today's investors are large foreign nationals who have set up joint ventures in Kazakhstan. For instance, the Koktau GOK is funded by the Russian Copper Company.
At the present time, the oblast's investment policy targets investors who are willing to invest in deep processing of raw materials for production of high value-added products. Let's cite the Koktas company's sand pits as an example. Local businesspeople have invested in them. Their method of work is to haul excavators, produce chippings and sell it at a higher price. At the same time, Uzbek investors are ready to invest over $200m in developing the sand pits and building a glass container plant and a brick one. This is more profitable than just selling raw materials. Besides, this project envisages creating around 4,000 new jobs in Kandagach as opposed to today's 40-50 individuals working in the sand pits.
In general, the development of manufacturing will lead to new jobs being created and the gap between the highest and lowest wages in the oblast being reduced. I want my fellow Aktyubinsk oblast residents to earn at least 100,000 tenge per month. This will make our president's idea about a car, an apartment/house and a good job for every Kazakh household come true. Hopefully, this will become possible in the next five years. By the way, today every fifth oblast resident owns a car.
Returning to the investment question, I would like to emphasise that last year saw the implementation of large projects such as production of pipes and fittings, and chrome ore pellets; concentrating fine-grain chrome ores and commissioning the second stage of the Zhanazhol Gas Turbine Power Plant with a capacity of 32,000 kilowatt-hours. In addition, a concrete products plant, H-beam and laminated panels lines, and a reinforced concrete building blocks floor were launched. In 2005 the landing strip of the Aktobe international airport was reconstructed.
This year we embarked on the second stage of the oblast's Programme for Industrial and Innovation Development for 2003-2015. A total of 45 promising projects with a total value of $1,358.3 million are being implemented. Oblast residents will soon be able to buy locally-produced foamed concrete and plaster slabs. A large cement works with a capacity of 1,250,000 tonnes per year will be put into operation.
I want to stress that shaping the Construction Materials cluster is seminal to boosting the oblast's competitive power. This sector runs second in terms of attractiveness for businesses after the services sector. The regional construction complex demonstrates the highest cost effectiveness indicator of 127.1%. Production of construction materials creates good opportunities for transboundary co-operation with neighbouring regions.
As for the mineral resources complex, we envisage developing copper-bearing ores deposits in Khromtau district, operating the Velikhovskoye and Benkalinskoye iron ore deposits and producing gold-bearing and nickel-cobalt ores from the Kempirsay deposit. In addition, it is planned to resume production and deep processing of phosphate rocks from the Chilisay deposit.
It will have been two years in July since you took the position of the oblast's head. What has changed in the oblast's community development?
The most important thing I have succeeded in doing is earning the trust of the people and of the head of state, who has been very supportive and helpful in implementing our programmes and blueprints. There have been certain positive shifts in the working attitude of the local executive authorities within the oblast. Above all this was achieved thanks to reinforcing the staff of the oblast executive departments and divisions. A dialogue has been established with all constructive forces such as political parties, NGOs and cultural centres among others.
In recent years, the youth associations have been more active. They organised 50 student voluntary construction brigades and 38 Zhasyl Yel teams including a total of 1,750 students. During the summer months they will be contributing to the construction of 38 sites and planting trees at seven sites in the oblast.
Taking account of the requests by the oblast's residents voiced during local executives' meetings with the people, the Katelco2 transmitter-receiver will be installed by the end of this year for broadcasting oblast TV programmes to all localities in the oblast. 
The general welfare of people has improved notably. Since the beginning of this year, around 5,000 new jobs have been created in the oblast. The average salary is 38,537 tenge per month, which is a 12.3% increase on 2005. The number of deposits by individuals has also gone up. I believe these figures are a solid proof that living standards are getting higher.
Interviewed by Gulshat Aibosynova, Aktobe
Yeleusin Sagindikov, Doctor of Economics. Born 1 May 1947 in the village of Kyzyl-Tu in Kobda District, Aktobe Oblast.1977 – graduated from the Aktobe Pedagogical Institute (teacher of maths); 1990- graduated from the West Kazakhstan Agricultural Institute (mechanical engineer); 1995-1996 – deputy governor of Aktobe Oblast; November 1996-October 2002 – mayor of the town of Aktobe; October 2002-July 2004 – deputy of the Senate of the Kazakh parliament; member of the Legislation and Legal Reform Committee; July 2004 – governor of Aktobe Oblast.

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